Table of Contents
1. The scope of the
problem
2. Who is involved?
3. What are the
challenges?
4. Current efforts
5. Conclusion

Assets stolen through corruption constitute a severe leakage
of state funds. These monetary losses undermine good
governance, weaken a stateâ&#x20AC;&#x2122;s accountability to citizens and
drain development resources. Global efforts to improve asset
recovery have tended to focus on tracing the funds, outlining
the legal obstacles to their return and negotiating how to give
back the money. Both developed and developing nations are
responsible for stealing assets and sidelining initiatives to
repatriate them to the countries from which they were taken.
When banks in the North and South give stolen assets a safe
haven, they profit from corruption. Ending this complicity is
urgent and will help to address the finance and governance
gap increasingly highlighted by the current economic crisis.
w w w. t r a n s p a r e n c y . o r g

Recovering stolen assets: A problem of scope and dimension
UNCAC, Chapter III and
Criminalising Corruption
UNCAC’s eight chapters establish
government obligations and
standards for preventing and
punishing corruption, international
cooperation, technical assistance
and asset recovery. As of April 2011,
UNCAC has 140 signatory states
and been ratified by 150 countries.
Chapter III lists the offences that
countries are required or
recommended to criminalise for both
public and private sector actors.
These include:
bribery;
embezzlement;
trading in influence;
illicit enrichment; and
money laundering.
In addition, Chapter III covers related
criminal proceedings, for instance,
concealing information or obstructing
justice in corruption cases.

1. The scope of the problem
What is a stolen asset?
The United Nations Convention against Corruption (UNCAC) provides the first
global framework to address the issue of asset recovery in both developed and
developing countries. Chapter V of UNCAC, which covers the recovery of stolen
assets, declares that states should take measures in accordance with their
national laws to initiate cases to recover ‘property’ that has been acquired
through corruption (Article 53(a)).1 Property is broadly defined and includes a
range of assets such as money held in bank accounts, stocks and bonds,
houses, cars, and ownership of companies and properties.2
Work on asset recovery thus far has focussed on pursuing large-scale cases of
political and grand corruption to get back these monies, investments and
property. The Stolen Asset Recovery Initiative (StAR), launched by the World
Bank and UN Office on Drugs and Crime (UNODC) in 2007, has been one of the
leaders in these efforts to stop and recover the ‘thefts of public assets’ by corrupt
public officials.3
As the UNCAC Working Group on Asset Recovery noted, however, the scope of
asset recovery is not necessarily limited to grand corruption and can also include
smaller cases.4 Any asset could be recovered as long as it were derived from
one of the corruption offences included in the convention.
Yet UNCAC has not completely resolved the issue regarding which assets are
the result of corrupt acts. For example, countries that have ratified the convention
are not required to pass laws to criminalise some offences included in UNCAC.
This loophole opens the door for legal manoeuvring and for countries to refuse to
return assets when national laws and international agreements do not match up.
It has been particularly an issue of concern for waging cases against public
officials who are suspected of corruption based upon a sizable increase in their
wealth relative to their income (i.e. illicit enrichment).5 Many developing countries
use illicit enrichment as a proxy for charging individuals with receiving bribes or
other undue advantages. Pursuing such cases in Europe or the United States is
usually impossible, however, as it would require reversing the burden of proof to
begin an investigation, an action prohibited under their legal systems.6 As a
result, illicit enrichment cases are rarely successful in getting stolen assets back
when they are held abroad.
Some figures on asset recovery
Due to the sophisticated nature of money laundering, it is very difficult to
determine the total global amount of stolen assets, both in terms of stock and
flow.

TI Working Paper # 02/2011

2

w w w. t r a n s p a r e n c y . o r g

Recovering stolen assets: A problem of scope and dimension
Illicit Flows: Lost Funds for
Development

This difficulty is further compounded by the fact that stolen assets are included in
estimates for the total illicit flow of resources being generated worldwide. It is
hard to quantify which portion of this flow is from money laundering and tax
evasion, and the share that is being driven by corruption. Moreover, there is no
consensus among the techniques being used to calculate the funds in question.7
As a result, there is a wide range of figures being publicly debated around the
flow of stolen assets. The World Bank estimates that the total cross-border flow
of proceeds from criminal activities, corruption and tax evasion occurring in all
countries may reach US$ 1.6 trillion per year, nearly half of which comes from
developing nations.8 On the other hand, a recent study by Global Financial
Integrity (GFI) found that average annual illicit outflows from developing countries
averaged between $725 and $810 billion, per year, over the 2000-2008 time
period.9 When compared to the nearly US$ 120 billion given in aid in 2009, illicit
flows represent an enormous reverse drain, siphoning off vital national resources
for building schools, stocking health clinics with medicine and meeting other
development needs.10
Looking at the total stock of stolen assets gives us yet another set of figures. The
French Catholic Committee against Hunger and for Development (CCFD) has
estimated that dictators in the last few decades have stolen between US$ 100
and US$ 180 billion. In the Democratic Republic of Congo, the notoriously
corrupt former leader, Mobutu Sese Seko, is thought to have taken the
equivalent to the annual gross domestic product (GDP).11 Such stock numbers
still fall short, however, since they do not include the plundering carried out by
corrupt leaders’ faithful cadre of associates and relatives.12
Asset recovery experts have argued that if legal barriers could be lowered, then
thousands of other cases would become viable, including smaller claims in the
realm of US$ 100,000 to US$ 5 million.13 This would mean that much larger
aggregate sums could be recovered, which would increase the effectiveness of
efforts to stem illicit flows and elevate the role of recovered assets in providing
additional development resources (see side bar).

The outflow of the proceeds of
corruption is an integral part of a
complex mechanism — a
phenomenon known as illicit financial
flows — which leads to drainage of
resources that could be used for
development.
Illicit financial flows include the
proceeds from illegal activities such
as corruption (bribery and the
embezzlement of national wealth),
criminal dealings and illicit
commercial activities. Experts have
argued that the first two categories
represent around 35 per cent of the
outflows while the last category
consists of the largest share of
capital drain from the developing
14
world.
Tax avoidance is considered part of
illicit commercial activities. A recent
Oxfam report found that at least US$
6.2 trillion of developing country
wealth is held offshore by individuals,
depriving developing countries of
annual tax receipts of between US$
15
64 and 124 billion.
The issue of tax avoidance has taken
on new force as a result of a
converging international consensus
on the topic. In recent years the G20
has taken a strong stance against
tax havens. At the urging of the G20,
a peer-review process is currently
underway as part of the OECD’s
Global Forum on transparency and
information exchange. The review
involves all G20, OECD and offshore
jurisdictions. It will examine both
legal and regulatory frameworks, and
subsequently the actual
implementation.

2. Who is involved?
Discussions on stolen assets frequently lead to fingers being pointed at corrupt
leaders in Southern countries. What is often forgotten, however, is that the theft
of public funds is only made possible by the involvement and sometimes active
encouragement of financial services firms in the North and South. Individuals
hiding stolen assets use the same secretive legal instruments and loopholes
employed by multinational corporations for tax-dodging and money launderers to
make their funds ‘clean’.

The current approach of targeting
dictators as part of asset recovery
efforts have yielded unsatisfactory
results, with only US$ 4 billion
returned and US$ 2.7 billion worth of
16
assets frozen worldwide.

Stolen assets are often legally managed by major global players in private and
offshore banking centres around the world. A recent report by Global Witness
found that despite numerous laws that are meant to require banks to perform due
diligence on their customers, especially in the case of politically exposed
w w w. t r a n s p a r e n c y . o r g

3

TI Working Paper # 02/2011

Recovering stolen assets: A problem of scope and dimension
Understanding Off-shore Financial
Centres and Tax Havens
Off-shore financial centres (OFCs)
are considered jurisdictions that have
relatively large numbers of financial
institutions engaged primarily in
business with non-residents.
The ability to attract such
international capital flows is done by
offering services that include low or
zero taxation, light financial
regulation, and banking secrecy or
anonymity. Of the 54 jurisdictions
classified by the International
Monetary Fund as OFCs, only 22
have ratified UNCAC to date.
An OFC or any financial centre
becomes a tax haven when they
meet the following conditions
developed by the Organisation for
Economic Cooperation and
21
Development (OECD):
the jurisdiction imposes no or
only nominal taxes;
there is a lack of transparency;
and
there are laws or administrative
practices that prevent the
effective exchange of
information for tax purposes
with other governments on
taxpayers benefiting from zero
or nominal taxation.
The OECD maintains a list of
jurisdictions considered to be
uncooperative tax havens. As of May
2009, there has been no jurisdiction
listed as an uncooperative tax haven
on the OECD list. This contrasts with
other findings that suggest eight
jurisdictions (including Panama,
Vanuatu and Guatemala, among
others) have insufficiently
implemented internationally agreed
22
tax standards.
Organisations such as the Tax
Justice Network and EURODAD
favour an expanded list of tax havens
which includes financial centres in
developed countries, such as London
23
and New York.

persons,17 some of the best known banks in the world have acted as repositories
for stolen assets. According to Global Witness, the son of the president of
Equatorial Guinea, who has allegedly committed various counts of corruption like
his father, had a personal bank account with Barclays Bank of London. The
American financial conglomerate Citibank has also been alleged by Global
Witness to have allowed the former corrupt president of Liberia, Charles Taylor,
to earn revenues from illegal timber sales by conducting the transactions through
correspondent banks.18 Even when corrupt funds are located and frozen, banks
continue to benefit from the interest the capital provides as protracted asset
recovery procedures take place.
The trail of transactions that channels stolen assets into bank accounts in
Northern and Southern financial centres is helped by the actions of different
actors along the way. The sophisticated methods employed to circumvent laws
and hide the proceeds of corruption require the skills of hired lawyers,
accountants and financial services experts. While many of these professional
groups regulate themselves to protect against such complicity, lack of oversight
and monitoring mechanisms often undercut preventive measures.
Offshore financial centres (OFCs) are the preferred destination for stolen funds
and their names can often be found among the global list of tax havens (see side
bar). OFCs are characterised by opaque financial structures, such as strict bank
secrecy laws and legal instruments that facilitate hiding the identity of who
actually owns the assets. Given that some of these centres derive a large portion
of their GDP from providing confidential financial services to non-residents, it is
not surprising that they are often reluctant to break their code of secrecy and
share information.
Offshore financial centres, however, are not the only ones to blame. Major ‘onshore’ financial centres often have lax banking and corporate regulation to attract
capital inflows, which in the process can enable the concealment of stolen
assets. For example, countries such as Switzerland, Andorra, Monaco,
Liechtenstein, Luxembourg and Cyprus have traditionally offered a high level of
bank secrecy and low tax regimes — features that facilitate the stashing of stolen
assets.19 However, changes in the industry standard of secrecy are beginning
due to court cases logged against these financial centres by governments
wanting to find out whether their citizens and companies are storing their money
elsewhere to evade taxes.
Despite these advances, major financial centres continue to exacerbate
problems that begin in offshore centres as a result of their own legal regimes.
Many countries, such as the United Kingdom, do not require that the real owners
(i.e. the ‘beneficial owners’) of a company be named in public registers.20 This
allows for companies incorporated in one country to be owned by a shell
corporation set up in another where the law does not require information
disclosure about the owners. As a result, a corrupt leader who acquires a shell
corporation in an offshore centre can hide his or her identity and use it to channel

TI Working Paper # 02/2011

4

w w w. t r a n s p a r e n c y . o r g

Recovering stolen assets: A problem of scope and dimension
Seeking Justice in France for
Stolen Assets from Africa

funds to an ‘on-shore’ centre like London, making the illicit origin of the money
extremely hard to trace.
While Northern centres house the largest share of the proceeds from corruption
that are deposited beyond home country borders, new developing world financial
nodes from Botswana to Dubai and Singapore are increasingly providing a safety
blanket to cover up corruption. Money stolen in Angola may be deposited in
Lagos and then transferred to Johannesburg to be ‘cleaned’ of its origin before
being re-routed to London or New York. The profitability of these routes has
stimulated the emergence of new centres. According to the US government,
Afghanistan, Brazil, Cambodia, Guatemala, Lebanon and Kenya are among the
top 60 countries of concern that are laundering illicit funds. Recent decisions by
countries like Ghana to target banking services to non-residents through low tax
rates and limited oversight will only worsen the problem.24

3. What are the challenges?
The practical work of asset recovery is immensely complex and the challenges
are numerous. One of the greatest obstacles has been locating the stolen funds.
As highlighted above, paper trails do not usually exist once funds are scrubbed of
all traces of the original offence that generated them.
Even when the money is found, many barriers prevent or delay its return.
Sovereignty issues and inconsistent legal requirements have spread a protective
umbrella over the activities of corrupt bureaucrats, money launderers and other
actors benefiting from corruption. Lack of coordination between national and
international agencies that deal with asset recovery processes and their limited
capacity are also practical problems that must be overcome.25
Low levels of legal expertise in many requesting countries and the patchy
provision of mutual legal assistance between requesting and requested states
mean that asset recovery cases face difficulty in getting off the ground.26 The
prohibitive cost of retaining skilled forensic accountants and lawyers — who are
often based in Northern countries and in places where the money is hidden — is
also a sizable obstacle. Even when cases are initiated, the accused parties may
manipulate legal protections, shielding themselves behind claims of respecting
personal property, privacy and human rights. These manoeuvres prolong legal
proceedings and can undermine cases on the part of requesting countries where
financial resources are limited.

In 2007, a report by the French civil
society organisation, Catholic
Committee against Hunger and for
Development (CCFD), identified
châteaux, apartments and other
assets that had been purchased in
France by a series of African leaders,
28
their families and close associates.
CSOs have since used these findings
to petition for a formal investigation
against three presidents: Denis
Sasssou N’Guesso (CongoBrazzaville), Omar Bongo-Ondimba
(Gabon) and Teodoro Obiango
Mbasogo (Equatorial Guinea).
The police investigation has
uncovered a trail of possessions. For
example, relatives of the president of
Gabon own 39 apartments (most of
which are located in the wealthiest
district of Paris), possess 70 bank
accounts and hold the titles to nine
cars (valued at roughly 1.5 million
29
euros).
Despite the evidence gathered, the
first case was dismissed by the
public prosecutor’s office. In
response, TI France, in collaboration
with other CSOs, filed a civil
complaint in 2008 to re-open the
30
case. In May 2009, the petition was
accepted by the court. However, this
decision was appealed by the Public
Prosecutor and in October 2009 the
decision was overturned. TI France
counter appealed and in November
2010 the highest court in France
accepted that an NGO could bring a
suit for recovery of stolen money,
creating a historic precedence.
As the case goes forward, the
government will investigate how such
a large amount of pricey real estate
and other assets were acquired in
France and whether corruption
provided the funding source. The
investigation is also expected to
reveal the identities of the various
intermediaries who worked with the
banks that have been identified in the
case of allegedly handling these
stolen funds.

Political will on both sides can also pose significant problems for asset recovery.
Complex political contexts in the requesting country, such as Egypt or Tunisia,
may hinder the return of funds. For example, banks may not want to return
assets because of self-driven financial interests or out of a concern that they will
be stolen again.27 Political ties between leaders of Northern and Southern
nations can also enable the safe storage of stolen assets. In 2007, an
investigation into the French holdings of allegedly corrupt African leaders was
halted in France in an action that civil society organisations (CSOs) claim may
w w w. t r a n s p a r e n c y . o r g

5

TI Working Paper # 02/2011

Recovering stolen assets: A problem of scope and dimension
The StAR Initiative – Recovering
Assets from Grand Corruption
The World Bank and UNODC jointly
oversee the Stolen Asset Recovery
(StAR) initiative, which aims to
ensure that there are no safe havens
for political officials who steal from
the poor.

have been motivated by political pressure from the French government. After
being re-filed by the TI national chapter in France, the case has since been
accepted by the French courts, who are investigating whether the assets in
question are the wealthy by-product of the leaders’ corrupt acts (see side bar).

The initiative has focused its work on
lowering the barriers to asset
recovery through policy research,
knowledge sharing, technical
assistance and training. This has
mainly been done by developing the
capacity of requesting and requested
35
states to effectively pursue cases.
During its first year, over 150
participants from 13 different
countries participated in introductory
workshops and 190 participants from
9 countries participated in training
36
courses hosted by StAR.

4. Current efforts

StAR has produced an Asset
Recovery Handbook, which aims to
help practitioners with the strategic,
organisational, investigative and legal
challenges of international asset
recovery. They have also developed
tools and guidance on politically
exposed persons and for asset and
income declaration, among others.
For more information, see:
www.worldbank.org/star.

Current initiatives have focused on overcoming and mitigating the numerous
obstacles that stop the outflow and return of the proceeds of corruption. These
have taken the form of standards, regulations, technical assistance and capacity
building, and advocacy.
Standards
The principles set forth by the Financial Action Taskforce (FATF) are useful for
preventing the proceeds of corruption from ever entering the banking system.
The FATF is an inter-governmental body established to develop and promote
national and international policies to combat money laundering and terrorist
financing,31 which both rely on the same banking system features that are used
to give stolen assets a safe passage out of countries. However, the FATF
recommendations have not been successfully implemented. A recent report by
Global Witness found that none of the 24 FATF member states are fully
compliant with their own recommendation (number six) to require banks within
their countries to perform thorough due diligence on politically-exposed
persons.32
Regulation and legislation

The Swiss Example
National anti-money laundering laws
provided the legal impetus for quick
cooperation in 2001 between Swiss
banks and the country’s prosecutor
to freeze the assets of Vladimiro
Montesinos, former chief of
intelligence in the Peruvian
government. This allowed for US$ 77
million to be speedily returned to the
National Bank of Peru in less than
37
one year.
In February 2011, Switzerland
enacted the “Duvalier Law” which
eased the rules on the confiscation of
dictators’ illegal assets. This
legislation would allow countries to
obtain restitution of funds without
producing a domestic court
38
conviction.

TI Working Paper # 02/2011

Another collective set of preventative and criminalisation measures for stolen
assets can be drawn from UNCAC. While UNCAC is a relatively new instrument,
it has seen some success in assisting the recovery of stolen assets. UNCAC has
been credited with facilitating the prosecution of recent claims of corruption
against former government leaders in Bangladesh. The country signed and
ratified the convention in 2008, a move which has helped to trigger the recovery
of US$ 200 million stored in offshore accounts linked to a former prime minister’s
son and government bureaucrats.33
Technical assistance and capacity building
Basing its mandate on UNCAC, the Stolen Asset Recovery Initiative (StAR),
under the auspices of the World Bank and UNODC, assists countries in lowering
the barriers to asset recovery through capacity building and providing advice and
assistance to requesting and requested states. StAR, however, does not
investigate cases although it has served as an intermediary to help return assets.
Individual governments have also launched proactive efforts to facilitate the
recovery of stolen assets through technical assistance. For example, the UK,
Liechtenstein and Switzerland fund training programmes for Southern law
enforcement agencies on formulating formal requests to recover stolen assets.34

6

w w w. t r a n s p a r e n c y . o r g

Recovering stolen assets: A problem of scope and dimension

Moreover, the European Union has established Asset Recovery Offices in 20 EU
countries to allow better information flows and aims to have effective asset
recovery offices across the Union by 2014.39
From the non-governmental side, the International Centre for Asset Recovery
(ICAR), located in Switzerland and launched by the Basel Institute for
Governance in 2008, is assisting developing countries to build capacity through
training and information sharing to trace, confiscate and repatriate the proceeds
of corruption. 40 In addition, ICAR has set up an experts network on asset
recovery: the Asset Recovery Experts Network (AREN). The network aims to
provide an informal, online forum of professionals to enable networking and
exchange information. 41

The ‘know your customer’ standard
that requires banks to vet actual and
potential depositors has great
potential to prevent the stashing of
stolen assets in financial centres.
For more than 10 years, TI has been
calling for the enforcement of this
measure, which is one of the
Wolfsberg Principles, a set of
recommendations adopted by eleven
leading private banks — from Banco
Santander to UBS (www.wolfsberg42
principles.com).

Advocacy
Civil society organisations (CSOs) like Global Witness have been active in
publishing investigative reports tracing stolen assets from governments to the
banks where they are stored. The reports have helped to build public awareness
of banking practices, as well as those of other financial institutions and
intermediaries that provide services that are complicit in sheltering the proceeds
of corruption. At times, these findings are used by CSOs and other parties to
facilitate cases and claims against banks and governments, as is currently
happening in France.
Additional advocacy work has revolved around the use of lobbying and
engagement, to reform policies and governance frameworks. The Bangkok
Declaration, issued by TI in 2010, calls for greater action from the international
community to tighten money laundering laws (see side bar).

5. Conclusion
When stolen funds are deposited beyond a nation’s borders, it takes a network of
complicit actors to hide them. Even when the funds are found, too often there is a
failure to repatriate them due to limited political will, lack of capacity and high
costs.
Preventing the flow of stolen assets and returning them to their country of origin
means overcoming these obstacles, which can only be accomplished through
simultaneous efforts by both Northern and Southern countries. More transparent
and accountable legal and financial governance is required in the world’s
financial centres to stop the outflow of stolen assets.
At the same time, a well-integrated international asset recovery regime in both
requesting and requested states is required to successfully locate and repatriate
the billions of dollars that have been stolen through corruption. Such a system
would help to bring corrupt leaders who steal their nations’ wealth to justice.

The Bangkok Declaration – TI
takes action on asset recovery
The Bangkok Declaration, issued in
November 2010 by the TI movement,
calls for changes in a variety of areas
to prevent and stem the flow of stolen
assets.
It demands greater transparency
across the board and in cross-border
wires, the beneficial ownership of
trusts and other financial vehicles,
customer due-diligence, and due
diligence of politically exposed
persons (all of which are already
FATF standards).
The declaration also urges countries
in which the stolen assets are located
to respond swiftly to requests for
mutual legal assistance and enforce
laws and regulations that prevent
frozen assets from staying within the
same institutions that accepted the
asset before their freezing.
It also demands that financial
institutions be held more accountable
for their actions. When they do not
release frozen assets to the legally
declared owner after an order has
been issued by the competent
jurisdiction, they should be made
legally liable. Moreover, it is
necessary to ensure that the benefit
from assets, once they are located
and frozen, go to the people of the
country from which they were stolen
and not the financial institutions that
43
hold them.

An effective international asset recovery regime, guided by UNCAC, and backed
by political will, would be a strong deterrent to corruption. It would help to build a
governance framework to deny the corrupt a safe haven for their stolen funds
and prevent the losses of financial resources needed for development.
w w w. t r a n s p a r e n c y . o r g

7

TI Working Paper # 02/2011

Recovering stolen assets: A problem of scope and dimension

This Working Paper was
produced by Farzana Nawaz of
the Research and Knowledge
Group at the TI Secretariat. Craig
Fagan, Angela McClellan and
Thomas Coombes contributed to
its drafting. The paper was
originally drafted in 2009 and
updated in 2011.
We would like to thank TI France
and TI UK for their assistance, as
well as the Basel Institute of
Governance for providing
guidance on this paper.
To learn more about TI's work on
asset recovery and the UN
Convention against Corruption,
visit: www.transparency.org/
global_priorities/international_con
ventions.
For more information about this
working paper and others in the
series, please contact Craig
Fagan at the TI-Secretariat:
plres [at] transparency.org.